Infrastructure

A major problem with the infrastructure bill, aside from its cost, is its lack of focus.  The Democrats have tried to include everything but the kitchen sink. The Republicans have tried to exclude non-traditional items from infrastructure bill, such as childcare. Nevertheless, the bill contains a hodge-podge of projects from roads and bridges to broadband internet connection.  The main goal seems to be pushing a lot of money out the door, rather than funding specific projects.  This will lead to a lot of waste, fraud, and mismanagement.  Since there are no priorities, politicians will fund pet projects and projects pushed by favored constituents, rather than projects that are most needed to keep America running. 

Much of Biden’s and the Democrats’ agenda seems to be giving blacks reparations payments without calling them that.  The previous stimulus bills and the proposed infrastructure bill will undertake a massive transfer of assets from white people to black and brown people, both in terms of jobs that will employ mainly black and brown people and in terms of the beneficiaries of the projects, e.g., the main beneficiaries of improved broadband internet will be poorer black and brown people.  Better internet is a priority, but we should recognize that there is a second agenda here.  Similarly, the Democrats will try to get more roads and bridges built in poorer parts of town.  That’s not bad, but it may not be what America needs to best improve its transportation system.  Of course, the non-traditional infrastructure proposals err even more in the direction of wasted money.  There will be some short-term benefit to spending money on warm and fuzzy things like childcare, but it will not provide the same benefit to the nation as repairing roads and bridges. 

I would prefer to see narrowly focused bills, e.g., a bill to replace bridges that have fallen into a certain state of disrepair that makes this dangerous to use.  A bill to repair airports that have become unsafe.  A bill specifically targeting broadband internet.  These bills could provide specific benchmarks to decide whether the programs were succeeding or not.  Otherwise, there will be lots of handwaving and celebrating all the money that got spent without evaluating whether we got our money’s worth. 

Finally, I am not sure that this is the time to do infrastructure for infrastructure’s sake, even if it is well planned.  We have just spent trillions on the previous stimulus bills, and we will continue to spend trillions on the theory that debt and deficits no longer matter.  It’s possible that there has been some change in the world financial situation that makes the national debt meaningless.  But it’s also possible that this is a temporary situation and someday interest rates may go back up and future generations will be faced with insurmountable debt, with will limit their future and leave them cursing this “me” generation that spent all its money on itself.

In the last few days, it looks like China has begun to take a more conservative approach to its financial wellbeing, limiting financial IPOs and huge expansions of businesses.  This may be political, protecting the power of the Chinese central government, but it could also be financially based, to make sure that the economy does not spin out of control.  Meanwhile, the US seems totally unconcerned about the red-hot financial situation as it pumps tons of money out the door and looks the other way as more and more “unicorns” go public, fed by trillions of investors’ dollars.  Maybe there is no tomorrow, but what if it rains tomorrow?  Will China be in better shape to deal with the rain?  I am afraid it might be.  There seems to be a consensus that there are not storm clouds on the horizon, but what if we are not looking closely enough.  Maybe those few clouds are not as harmless as they look.     

Human Rights

 

After Trump’s presidency there is a lot of talk about whether the United States remains a beacon light for democracy, human rights and the moral standing that Americans rejoiced in for so long.  In fact, the idea of the US being a “city on a hill” is a relatively recent concept.  The US Constitution, which is widely criticized today, was always seen as enlightened, but America’s practices were not frequently highly praised.  What people now look back on as the good old days of democracy were days when segregation still existed, and a much higher percentage of the population lived in what we now call poverty and wealth inequality. 

The State Department did not have a human rights bureau until the Carter administration created one.  I had to write the first draft of the first human rights report on Brazil while I was working on the Brazil desk.  Brazil still had a military government and had many black marks in its human rights record.  I remember trying to make the report as positive as possible for Brazil, but always made more negative by the human rights bureau.  I remember Mark Schneider and Michelle Bova particularly wanted the report to be more critical of Brazil.  I suppose I had a case of “clientitis,” from having served in Brazil before working on the Brazil desk. 

In any case, I don’t think “human rights” were nearly as important an issue earlier as they were in the Carter administration.  There were the Nuremberg war crimes trials, but the Holocaust did not become a widely publicized event on everyone’s lips until years after World War II.  It was a horrible thing, but there was no Holocaust Museum until 1993, 

It is only in the last fifty or so years that the US has begun to proclaim its moral superiority to the world and demand other countries to equal our level of human rights protection.  We should not be surprised if we and the rest of the world begin to look at our standing with a more jaundiced eye. 

July 4, 1976

On July 4, 1976, I was working in the Current Intelligence Office of the State Department Operations Center. It was the 200th anniversary of US independence. The glitterati were having a big party in the eighth-floor diplomatic reception rooms of the State Department. My shift happened to be in the evening while the fireworks on the mall were going off. The powers that be invited all the officers working in the Operations Center to come up for a few minutes and watch the fireworks from the eighth-floor balcony overlooking the mall. I went, and although I could only stay a few minutes, it was memorable. A few years later while I was working on the Brazil desk, President Jimmy Carter held a dinner for all the Latin American ambassadors in Washington. I had to meet the Brazilian Ambassador and escort him up to the dinner, they wait and escort him out of the building after dinner, along with the desk officers for the other Latin American countries. While we were waiting, Rosalynn Carter came down to thank us all for helping out with the dinner. She demonstrated the Carters’ concern for the little guys, and I appreciated it.

Nixon and the Gold Standard

David Westin’s “Balance of Power” show on Bloomberg is often insightful. Today I learned of Jeffrey Garten’s new book Three Days at Camp David: How a Secret Meeting in 1971 Transformed the Global Economy. It is a bout President Nixon’s decision to take the US off the gold standard, under which gold had been pegged at $35 per ounce. It was a momentous decision by Nixon, but one that has received less attention than other momentous Nixon decisions: the opening to China, pursuit of the Vietnam War, creation of the Environmental Protection Agency, and of course Watergate. I haven’t read the book, but I should because it’s time someone recognized how important that 1971 decision was. It changed the way the world economy worked. It opened up the global financial system but also made it more unstable. Jimmy Carter got a lot of grief for the high inflation that took place during his administration. I think at least part of it was due to Richard Nixon taking the US off the gold standard, making it much easier for inflation to take place. Markets were adapting to the new reality of depending on the Federal Reserve, rather than the gold in Fort Knox to control the value of the dollar. Central banks around the world became more important. Despite being on the gold standard, Nixon was faced with inflation of over 5%, as well as high unemployment. He was under pressure to devalue the dollar’s price against gold. Wikipedia says that Nixon conferred with recently appointed Treasury Secretary Connelly, Fed chair Arthur Burns, Treasury Under Secretary Paul Volker (later to be Fed chair under Jimmy Carter), and others, probably including OMB chair George Shultz (later to be Secretary of State under Reagan). A Wall Street Journal article said that Fed chair Arthur Burns played only a minor role there and that Henry Kissinger, who may have been preoccupied with China, was not there. Garten says Nixon’s decision showed that the US could no longer support the world economy alone. To Nixon’s credit, he took the initiative, rather than waiting for a crisis when the world came calling all at once to collect gold for dollars and there was not enough gold to pay everybody. Taking preemptive action was the right decision, even if it left Jimmy Carter holding the bag a few years later. Whether it was exactly the right action is debatable, but the United States and the world have prospered in the fifty years since then. In his interview on Bloomberg, Garten mentioned that there are some similarities between 1971 and today. Financial conditions are unsettled today and there is a potential big change in the offing, in the form of cybercurrencies. I don’t think that Bitcoin is necessarily the future of cybercurrencies, but I think some new form of it may be, probably a currency connected in some way to a central national bank, or maybe several central banks. It may use blockchain, or some new improvement for authenticating transactions that uses less energy. Will Bitcoin be to the new cybercurrency what gold is to the dollar? I doubt it, but it could be. Many people are betting that it will be. Will a new international conference set up a new system, as Bretton Woods did after World War II? Or will individual nations set up their own mechanisms as Nixon did in 1971?